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Journal of Civil Engineering and Architecture 9 (2015) 526-533

doi: 10.17265/1934-7359/2015.05.004
D DAVID PUBLISHING

Analysis of Risk Factors for Highway Construction


Projects in Egypt

Mahmoud Mohamed Mahmoud Sharaf1 and Hassan T. Abdelwahab2


1. International Department, Acciona Engineering S.A., Doha 26026, Qatar
2. College of Engineering, Cairo University, Giza 12411, Egypt

Abstract: Egypt construction projects are associated with different levels of risks. The lack of familiarity of project management
standards is one of the common risks in the construction industry in Egypt. The main aim of this paper is to identify the most significant
risk factors affecting highway construction project in Egypt to decrease the likelihood and impact of those risks. The research method
starts with extensive literature review to provide a prime risk factors list which was also augmented to expertise to reach final risk factor
list which contains all risks that may be faced during highway construction. Subsequently, a set of 12 risk groups consisting of 73 risks
was selected and a questionnaire survey was conducted to determine the likelihood and consequences of the identified risks. Later, a
software application was developed using MATLAB to facilitate risk evaluation of highways projects. Results indicated that the risk
factors arise from owner side is one of the most common risk factors in the construction industry in Egypt as the owner in the majority
of construction project in Egypt is the governmental sector, however, the overall project risk of highway construction projects in Egypt
is considered as at a medium level.

Key words: Risk management, highway projects, artificial intelligence, construction in Egypt.

1. Introduction conducted and reviewed to identify the recent risk


factors rise in the construction projects and affect their
A risk is defined as the combination of probability of
accomplishment through this. Also, a prime risk factor
an event and its impacts on project objectives [1, 2]. A
list was initiated.
positive consequence presents an opportunity whereas
Local project risk studies in Egypt [8-10] were
a negative consequence poses a threat. The PMBOK
focused on pipelines and recently on airport
(project management body of knowledge) [3] defines a
construction. Therefore, the objective of this research
standard process to identify risks, which is based on an
is to identify the significant risks that affect the
iterative process because new risks may evolve or
highway construction projects in Egypt.
become known as the project progresses through its life
The developed software can be used to support
cycle.
project managers and construction companies in
The Project Management Guideline [4] mentioned
decision making [11, 12].
that risk identification determines what might happen
In order to facilitate the risk management process for
could affect the objectives of the project, and how those
the decision makers in Egypt who are involved in roads
things might happen. It is important to ensure that the
construction industry and might did not have the risk
widest range of risks is identified as risks omitted at
management knowledge, a software application is
this step may not be analyzed and treated in subsequent
developed to help them in project risk degree
steps.
assessment.
International risk management studies [5-8] were
The research aims to apply complete risk
Corresponding author: Mahmoud Mohamed Mahmoud management process on highway construction project
Sharaf, M.Sc., research field: risk management. E-mail: in Egypt. Through this process, there will be a list of
mmahmoud_ext@acciona.com.
Analysis of Risk Factors for Highway Construction Projects in Egypt 527

risks in highway construction (risk identification) and The literature review was considered to develop the
definition of the most significant risks through initial risk factors list, parallel with this step, a pilot
applying evaluation process (applying risk analysis and survey was conducted to reach the second risk factors
assessment). list. The pilot surveys consider the most important four
The research based on three main phases is as projects at the moment in Egypt which were:
follows: (1) the design and supervision upgrading
 Phase I: risk identification (initiating risk factors Cairo-Alexandria-Matrouh Desert Road to Freeway
list); Standards;
 Phase II: risk evaluation (asses risk factors and (2) upgrading of Greater Cairo Regional Ring Road
define the most significant risk factors in highway to an integrated transport corridor;
construction projects); (3) the design of Shoubra-Banha Highway project;
 Phase III: development of MATLAB application (4) infrastructure construction for Cairo festival
to help decision makers. city.
In Phase I, extensive literature review on risk During Phase I, it is considered to cover
management related to highways was conducted to engineering from different fields as civil (road and
provide a prime questionnaire. In addition, this list was bridges) and electromechanics which are working for
augmented to expertise to reach risk factors list that different organizations as clients (The Egyptian
contains all risk factors that may be faced by highway Transportation Ministry and The General Authority
construction project. for Roads, Bridges and Land Transport), consultants
Phase II defines the risks through a questionnaire (local and international) and contractors.
survey that was conducted on a group of expertise from Combining both risk factors lists after consulting
different sectors (contractor, consultant and owner) and expertise to develop our final risk factors list,
also from different environment (local and identified risks were categorized into 12 groups as
international). The objective of this phase is to reach follows:
the most significant risks that highway construction (1) force majeure risks—it includes risks that are
projects faced in Egypt. beyond the control of the project sponsors. Such risks
Phase III deals with developing a software include flood and earthquake;
application using MATLAB fuzzy logic. The (2) economical risks—risks that arise due to market
developed software can be used to support project downturn and affect the investment negatively or the
managers and construction companies in decision risks that occur due to economic instability;
making. (3) project finance risks—all risks that relate to
project cash flow and balance sheets of the project
2. Research Methodology
participants;
The research methodology included two phases: (4) standards and regulation risks—this category is
namely risk identification and risk analysis. concerned with application of standards and regulation
throughout the project life cycle;
2.1 Phase I—Risk Identification
(5) sponsor risks—this group includes risks
The research work started with an extensive associated to the sponsor;
reviewing for past researches concerning risk (6) design risks—this risk group covers risks that
management containing pervious master thesis, arise during the design stage;
engineering journals and academic published papers. (7) subcontractor risks—this group is focused on
528 An
nalysis of Ris
sk Factors forr Highway Co
onstruction Projects in Eg
gypt

subcontractoors; nstruction prooblem; secondd, consultant is committedd


con
(8) equippment risks— —this groupp includes risksr to help
h the ownner in identiffying projectt risks in thee
attributed to equipment; beg
ginning of dessign and the ssame for con ntractor in thee
(9) site location rissks—risks arre attributedd to beg
ginning of construction. The ownersship type off
location of the
t construction site; partticipating contractors com mpanies was one of twoo
(10) project staff riskks—this grouup includes risksr typees mainly in private sectoor or a publicc sector, andd
related to thee project resoources; the most frequeent type wass the public sector. Thee
(11) envvironmental and a geotechnnical risks——this resppondents werre classified according to o companies’’
group gives attention tow wards risks ariise during prooject rolee as followinng (consultannt, contractor and owner)..
constructionn because off deficiency in geotechnnical Con nsultant wass the most frequent type. t Expertt
studies durinng the designn stage of the project; exp
perience was divided intoo four catego ories: juniorss
(12) connstruction risks—this
r group conttains (0-55 years) expeerience, senioors (5-10 yearrs), managerss
possible riskks during the project execuution. (10-15) and expeertise (over 15 years). Thee survey triedd
to cover
c most ofo the experiience range starting
s fromm
2.2 Phase III—Risk Analyysis
juniiors till expeert, however,, normal disttribution hadd
Phase II includes a questionnairee survey witth a beeen applied regarding
r thhe selectionn of expertt
group of expperts in orderr to evaluate risks
r identifieed in exp
perience. Resuult of this waas the most frrequent rangee
Phase I. A questionnaire
q e survey wass conducted from f of experience of o seniors annd manger as a shown inn
November 2011 to Appril 2012. The T survey was Fig. 1.
distributed to
t 50 expertss (40 responses were received For
F each risk, experts weree asked to assiign an impactt
out of the 505 distributedd questionnaaire). The surrvey based on scales presented
p in T
Table 1 and th
he probabilityy
covers expeerts from diffferent backggrounds (civiil or for a risk to occcur. Then eeach risk is rated on itss
electrical suurveyors) andd interviews were conduucted prob bability of occcurring and iimpact on an objective
o if itt
with projeccts managerss, consultantt engineers and doees occur. Tablle 2 shows thrresholds for loow, moderatee
project engiineers, especcially those who w executee for or high
h risks.
roads projeccts. Also, fooreign expertts who workk on
3. Analysis
A an
nd Results
some highw ways infrastruucture projectts in Egypt were w
involved. Tables
T 3 and 4 summarizee the question nnaire resultss
The surveey tried to covver all types of
o role involveed in for the considereed 12 risk cateegories and inndividual riskk,
highway coonstruction. The T consultaant role was the pectively. Reesults indicateed that risks attributed too
resp
most frequennt type as this depends onn two things: first,
f the sponsor categgory have higgh risk rating.. The averagee
the consultaant involved ini the projectt for longest time
t k score of thee sponsor rissk group is 0.49.
risk 0 The topp
period (desiggn and constrruction) and assigned to solve rankked risk factoors (risk scoree > 0.5) affectting highwayy

Ownersh
hip types O
Organization rolle Experien
nce
Owner Junior (5~10)
Privvate 20% Experts (>15)
333% Contractor 20% 40%
30%

Public
Consultant Manager (10~15)
67% Senior (5~10)
(
50% 30% 40%%
(a) (b) (c)
Fig. 1 Questtionnaire respoondent profile: (a) ownership
p types; (b) org
ganization rolee; (c) experiencce.
Analysis of Risk Factors for Highway Construction Projects in Egypt 529

Table 1 Sample from risk factors impact on the projects (Group 2).
Risk group Risk factors Risk factors definitions
Corruption Payment for services or material which the recipient is not due
Owner bankrupt A legal status of a person or an organization that cannot repay its duties
Frequent changes in government , protest for change of government or disputes
Political changes
between political parties
Applied broadly to a variety of situations in which some financial institutions suddenly
Economical crisis
lose a large part of their value
Group 2: financial Market inflation A rise in the general level of prices of goods and services in an economy over a period
/economical risks of time. When the general price level rises, currency buys fewer goods and services
An exchange rate between two currencies is the rate at which one currency will be
Variation rate of
exchanged for another. It is also regarded as the value of one country’s currency in
exchange
terms of another currency
The increase in the financial charge or other levy upon a taxpayer or the functional
Taxation risk
equivalent of a state such that failure to pay is punishable by law
Variation in raw material Increase the prices of basic material from which a product is manufactured or made,
prices frequently used with an extended meaning

Table 2 Defined conditions for impact scales of a risk on major project objectives.
Project objective Very low (0.1) Low (0.3) Moderate (0.5) High (0.7) Very high (0.9)
Insignificant cost 5%~10% cost 10%~20% cost
Cost < 5% cost increase > 20% cost increase
increase increase increase
Insignificant time < 1 month time 1 to 3 months time 3 to 6 months time > 6 months time
Time
increase increase increase increase increase
Key criteria cannot
Quality Minimal impacts Small reduction Some reduction Significant reduction
be achieved

Table 3 Probabilities and impact matrix.


Impact
Very low (0.1) Low (0.3) Moderate (0.5) High (0.7) Very high (0.9)
probability
0.90 0.09 0.27 0.45 0.63 0.81
0.70 0.07 0.21 0.35 0.49 0.63
0.50 0.05 0.15 0.25 0.35 0.45
0.30 0.03 0.09 0.15 0.21 0.27
0.10 0.01 0.03 0.05 0.07 0.09

Table 4 Summary results of the questionnaire by risk category.


Number of risk per rating class
Risk category
Total Low Medium High
Force majeure 6 5 1 0
Economical 7 1 6 0
Project finance 5 2 1 2
Standards and regulation 4 0 2 2
Sponsor 4 0 0 4
Design 8 0 3 5
Subcontractor 4 1 3 0
Equipment 5 2 0 3
Site location 4 1 2 1
Project staff 11 0 5 6
Environmental and geotechnical 5 1 3 1
Construction 10 1 7 2
Total 73 14 33 26
530 Analysis of Risk Factors for Highway Construction Projects in Egypt

construction projects in Egypt are delay in making categories. Every FIS consists of three inputs
decision, land acquisition and interference from the representing the risk factors with high scores within the
project owner. risk category. The proposed model includes four stages
in order to calculate the project average risk as shown
4. Project Risk Assessment Model
in Fig. 1. The model output is a value between 0 and 10
A model for project risk assessment was built using in which 0 indicates “no risk” whereas a value of 10
the MATLAB fuzzy logic toolbox [7]. The proposed represents a high-risk project. In addition, the model
model calculates the average risk for highway output includes three-dimensional surfaces for risk
construction projects. The model consists of 12 FIS trends as shown in Fig. 2.
(fuzzy interface system) representing the 12 risk A simulation run was conducted to determine the

Individual risk Combined risk Output of the combined Combined scores Output of the project
scores scores risks scores for risk categories risk assessment
Fig. 2 Half-structure of the proposed fuzzy model (the number is the value of the risk factor from 0~10 and the risk factor
value is the result of the research work).

Combined
risk score

Risk No. 2 Score Risk No. 1 Score


Fig. 3 A sample output of the proposed fuzzy model.
Analysis of Risk Factors for Highway Construction Projects in Egypt 531

Table 5 Results of the questionnaire.


Average Average Risk
Category Risk Low (%) Medium (%) High (%) Rating
impact probability score
Earthquake 80 20 0 0.31 0.18 0.06 Low
Flood 20 60 20 0.64 0.50 0.32 Medium
Fire 70 30 0 0.21 0.20 0.04 Low
Force majeure
Tornado 70 30 0 0.29 0.24 0.07 Low
War 10 70 20 0.80 0.05 0.04 Low
Revolution 70 30 0 0.33 0.21 0.07 Low
Sponsor bankrupt 20 70 10 0.57 0.47 0.27 Medium
Political changes 30 40 30 0.59 0.52 0.31 Medium
Economic crisis 10 60 30 0.63 0.54 0.34 Medium
Economical Market inflation 40 40 20 0.54 0.47 0.25 Medium
Variation rate of exchange 20 60 20 0.58 0.52 0.30 Medium
Taxation risk 80 20 0 0.23 0.32 0.07 Low
Raw material prices 20 50 30 0.56 0.51 0.29 Medium
Time of payments 0 50 50 0.76 0.62 0.47 High
Advance payment 50 30 20 0.46 0.44 0.20 Medium
Project finance Project time extension 0 60 40 0.70 0.81 0.57 High
Procurement plan 30 60 10 0.39 0.49 0.19 Low
Material procurement 100 0 0 0.20 0.17 0.03 Low
Safety regulation 0 50 50 0.67 0.72 0.48 High
Standards and Quality assurance 0 90 10 0.59 0.53 0.31 Medium
regulation Quality control 0 70 30 0.77 0.49 0.38 High
Not applying cost control 10 60 20 0.72 0.42 0.30 Medium
Delay in making decision 0 10 90 0.82 0.73 0.60 High
Interference 0 30 70 0.75 0.70 0.53 High
Sponsor
Work permits 0 40 60 0.66 0.57 0.38 High
Short contract duration 0 70 30 0.60 0.65 0.39 High
Road alignment 0 60 40 0.74 0.69 0.51 High
Design error 10 60 30 0.67 0.47 0.31 Medium
Traffic flow 0 70 30 0.63 0.69 0.43 High
Alignment availability 10 80 10 0.61 0.54 0.33 Medium
Design
Change in design 0 50 50 0.69 0.58 0.40 High
Scope vagueness 20 60 20 0.57 0.45 0.26 Medium
Shortage of information 20 40 40 0.68 0.54 0.37 High
Improper feasibility study 20 30 50 0.69 0.60 0.41 High
Subcontractor bankrupt 50 50 0 0.33 0.47 0.16 Low
Subcontractor quality 10 80 10 0.50 0.61 0.31 Medium
Subcontractors
Subcontractor delay 10 90 0 0.47 0.65 0.31 Medium
Subcontractors 20 80 0 0.44 0.58 0.26 Medium
Condition 0 60 40 0.83 0.47 0.39 High
Availability 0 40 60 0.81 0.54 0.44 High
Equipment Storage 70 20 10 0.45 0.39 0.18 Low
Maintenance 0 50 50 0.74 0.57 0.42 High
Mobilization 70 20 10 0.40 0.34 0.14 Low
Site facilities 50 50 0 0.36 0.37 0.13 Low
Site security 50 20 30 0.55 0.47 0.26 Medium
Site location
Site mobilization 10 90 0 0.54 0.45 0.24 Medium
Land acquisition 0 30 70 0.81 0.70 0.57 High
532 Analysis of Risk Factors for Highway Construction Projects in Egypt

(Table 5 continued)
Average Average Risk
Category Risk Low (%) Medium (%) High (%) Rating
impact probability score
Staff training 0 80 20 0.61 0.56 0.34 Medium
Staff availability 10 50 40 0.70 0.55 0.39 High
Change in organization 0 90 10 0.51 0.58 0.30 Medium
Staff teamwork 30 70 0 0.51 0.51 0.26 Medium
Staff experience 0 90 10 0.76 0.46 0.35 Medium
Project staff Manager experience 10 70 20 0.70 0.47 0.33 Medium
Project management plan 0 60 40 0.69 0.67 0.46 High
Consultant experience 0 40 60 0.78 0.56 0.44 High
Contractor experience 0 40 60 0.80 0.61 0.49 High
Subcontractor experience 30 20 50 0.68 0.54 0.37 High
Communication plan 10 40 50 0.73 0.64 0.47 High
Environmental factors 30 50 20 0.53 0.60 0.32 Medium
Environmental Subsurface conditions 10 50 40 0.70 0.54 0.38 High
and Geotechnical survey 30 60 10 0.45 0.43 0.19 Low
geotechnical Dewatering 20 70 10 0.49 0.45 0.22 Medium
In-accurate survey 20 80 0 0.59 0.43 0.25 Medium
Contract terms 20 60 20 0.64 0.40 0.26 Medium
Delay in approvals 10 70 20 0.63 0.53 0.33 Medium
Conflicts 20 80 0 0.53 0.46 0.24 Medium
Productivity 0 40 60 0.78 0.57 0.44 High
Defective work 20 50 30 0.60 0.51 0.31 Medium
Construction
Failure of work 40 60 0 0.52 0.36 0.19 Low
Changing need 20 80 0 0.53 0.53 0.28 Medium
Rework 30 70 0 0.51 0.44 0.22 Medium
Project delay 10 90 50 0.67 0.58 0.39 High
Claims 10 80 10 0.50 0.63 0.32 Medium

overall average risk factor for highway projects in the model, the overall risk in the highway construction
Egypt using the questionnaire data. Model results projects in Egypt is considered at a medium level and
indicated that the overall risk value for the highway hence needs to deploy the use of proper risk
construction project in Egypt is equal 7 of 10. The management.
result indicates that highway construction projects in
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